State revenues continue to come in above forecast in latest monthly report from forecast council

The state Economic and Revenue Forecast Council has released its latest monthly update. The news continues to be good.

 Major General Fund-State (GF-S) revenue collections for the December 11, 2017 – January 10, 2018 collection period came in $87.8 million (5.9%) above the November forecast. Cumulatively, collections are now $121.4 million (3.4%) higher than forecasted.

The state economy continues to outperform the nation.

 In December, the U.S. Department of Commerce, Bureau of Economic Analysis (BEA) released state personal income estimates for the third quarter of 2017. According to these estimates, Washington personal income rose to $418.3 billion (SAAR) in the third quarter of 2017 from $414.1.0 billion in the second quarter. The reported 4.1% growth rate (SAAR) in Washington personal income was the highest among the states and District of Columbia and exceeded the 2.7% growth rate for the U.S. by a large margin.

Third quarter Washington personal income growth was boosted by very strong growth in information earnings, which are difficult to adjust for seasonality. Washington personal income excluding information earnings grew 3.0% in the third quarter, which was seventh best in the U.S. and still exceeded the national average of 2.7%. Over the year, Washington personal income grew 4.6%, which was also highest among the states and DC and easily surpassed the 2.6% rate for the U.S. as a whole.

As lawmakers address the state’s supplemental budget, this helps.

Oregon economist examines occupations, wages and education; postsecondary education pays off

While our focus is Washington, we pay attention to research and analysis from around the country, with particular interest in what’s happening in neighboring states. The Oregon Office of Economic Analysis routinely produces some valuable work. As we’ve written often, employees with postsecondary credentials or some college will fill most of the great new jobs opening up in our state. Last week we pointed to recent research from Georgetown University confirming the new reality.

Back to Oregon. Josh Lehner, senior economist at the Office of Economic Analysis, looks at the relationships among education attainment, wages and occupations.

…the correlation between education and pay is strong. The surest path toward a high-wage job in today’s economy is a college degree, and in some cases a graduate degree. That said, it is important to point out that certificate programs, apprenticeships and the like also further individuals’ skills.

He makes the point in a series of graphs; we commend the brief blog post to your attention. 

In our 2017 foundation report, we wrote,

Postsecondary education pays off for individuals. In 2015, median annual earnings for a full-time worker with a bachelor’s degree were 66 percent higher than those of a worker with only a high school diploma.

The implications of increasing postsecondary attainment for society are also dramatic. BCG estimates that in a typical high school cohort of 81,000 students, 70 percent postsecondary attainment means 31,000 more students will earn a credential each year. Each will earn nearly $1 million more over his or her lifetime. Collectively, their success will reduce unemployment by a third and poverty by nearly half, saving our state billions of dollars a year in social spending.

The benefits of improving educational attainment are clear and uncontested. Postsecondary education and training lead to rewarding career opportunities. 

 

Milken Institute: Seattle metro ranks as #17 “Best Performing Large City.” Job creation, wages, and tech are key criteria.

Seattle comes in at No. 17 in the Milken Institute’s 2017 “Best Performing Cities” report. The Provo-Orem, Utah metro tops the list.

With the sub-title, “Where America’s Jobs are Created and Sustained,” the report focuses on a handful of metrics:

The index measures growth in jobs, wages, salaries, and technology output over five years (2011-2016 for jobs and technology output and 2010-2015 for wages and salaries) to adjust for extreme variations in business cycles. It also incorporates the latest available year’s performance in these areas (2015-2016 for jobs and technology output and 2014-2015 for wages and salaries). In addition, it includes a measure of 12-month job growth (August 2016-August 2017) to capture recent momentum among metropolitan economies.

The Seattle profile states,

Seattle-Bellevue-Everett, WA, dips seven places to 17th, with a larger degree of decline in one-year wage growth and short-term job growth.The lower growth rates in the short-term indicators should not be deemed a sign of a declining economy. In fact, this metro has been standing among theTop 20 in our ranking since 2012. As in the 2016 ranking, it has strong performance in ve-year wage growth (No. 6) and high-tech GDP concentration (No. 2)…

The growth in the tech sector is the main contributor to the recent strong economic performance of the metro.The talent pool, together with relatively cheaper housing prices in this metro compared with the Bay Area or New York City, are the main reasons for the growth of the tech sector in Seattle- Bellevue-Everett. In 2016, the share of population with at least a bachelor’s degree accounted for 46.2 percent of the metro’s population aged 25 and over.

Two Washington cities rank among the top 10 performing small cities. Bend-Redmond, Oregon ranks No. 1 on the small city list.

The Wenatchee profile points out some key strengths, including new technology.

…this is a 31 rank improvement over last year’s edition. Strong growth in jobs and wages in both one- and five-year indicators contribute to the metro’s fth-place nish this year.

The metro is highly dependent on agriculture, speci cally apples. A heavy re season has spared the metro’s crops, helping to maintain growth. The metro hosts the Washington State UniversityTree Fruit Research and Extension Center, which benefits from an area that produced more apples than the rest of the U.S., Canada, and Mexico. The metro hopes to introduce a new apple WA 38, or the “Cosmic Crisp,” in 2019 and mass market it in 2020. The apple will be priced to compete at the upper-end of the apple market where profit margins are higher. C&O Nursery in Wenatchee has invested in tech company Phytelligence, which is developing more robust planting methods for fruit trees and grapevines.

Of Bellingham, Milken writes,

Bellingham, WA, gained 68 spots over the previous ranking to end up eighth on this year’s BPC Small Cities index. The last time this metro was in the Top 10 was 2008. Solid cornerstone industries have helped Bellingham grow, aided by a high concentration of high-tech firms. The metro’s competitive advantages from bordering Canada, the university, favorable changes in demographics, and solid performances from extraction industries lifted growth.

Bellingham has significant employment in the natural resource sector. The two most prominent industries are petroleum products and aluminum, which have helped expand the regional economy. The petroleum refinery supports both U.S. and Canadian crude.

 Solid strengths on which to build. As the authors write, high performance is not an accident.

While national and international political and economic forces can affect near-term performance and can lie beyond a region’s control, the top-performing metros have cohesive strategies that allow them to leverage their assets more effectively. They offer important lessons that may be helpful to peer regions.

And a possible caution for Seattle,

As rising wages and rents raised the cost of doing business in cities like San Francisco, Seattle, and San Jose, some rms chose to relocate or expand away from these regions, distributing opportunities to other parts of the U.S. Managing growth and making continued quality investments in infrastructure and education will be key to these cities prospering in the long term.

We know a number of our readers enjoy these annual metro profiles. The Milken report is a good read. T

Seattle Times editorial board to Seattle School Board: Work with, not fight, charter schools.

The latest roadblock to charter public schools in Seattle thrown up by the Seattle School Board has prompted an editorial rebuke from the Seattle Times. Last week, Seattle Public Schools voted to oppose a zoning request submitted by a charter public school. From the ST report last week,

In an attempt to inhibit the growth of charter schools, the Seattle School Board voted Wednesday to oppose a request to let one charter construct a larger building than city zoning rules allow.

The School Board’s resolution… is aimed at a new high school that the Green Dot charter-school network hopes to build within a few miles of Rainier Beach High, which is part of Seattle Public Schools. Green Dot needs a zoning variance from the city in order to build the three-story, 58,000 square-foot school on the site.

It’s not the school board’s decision to make; the city will either grant or deny the variance. The board’s action was gratuitous and telling. As the Seattle Times editorial board writes

Since Washington voters decided in 2012 to give charter schools a try, the Seattle school board has been fighting to stop them from offering an alternative public-school experience to Seattle parents.

The latest salvo in that battle — a vote last week to oppose a proposed zoning change to allow a new charter high school to open in south Seattle — looks like another desperate move by an organization fighting change.

Desperate opposition to change seems to be a pattern for some in our state. As we wrote in February when Judge John H. Chun found Washington’s charter public school law is constitutional,

Among the remarkable aspects of these unwarranted lawsuits from the WEA and its allies (several of which were denied standing by Judge Chun) is the energy and money spent in attacking a charter school law considered the best in the nation

It would be best for all concerned to let this be the last chapter in the saga. Let the decision stand and focus on improving public education for all students, those in traditional public schools and those in charter public schools.

That decision was appealed by the coalition of Washington Education Association and others. The state Supreme Court accepted the appeal and is expected to hear arguments in February or March. 

The ST editorial contrasts Seattle’s opposition to the approach taken in Spokane.

Instead of fighting the innovative new schools at every turn, Seattle Public Schools should have taken a page from the Spokane School District plan and worked with charter schools to provide quality options for students.

The editorial concludes with the essential point:

Parents have a right to vote with their feet and send their children to whatever school best meets their needs, from the public school down the block, to a private school miles away or a new charter alternative nearby.

The school district should not limit those choices…

Right.

Governor calls for increased school funding, capital budget and new taxes in State of the State; GOP insists on Hirst fix

Gov. Jay Inslee yesterday delivered his 2018 State of the State address. (video, speech begins at about 32 minutes; view also the Republican response). In it he called on lawmakers to adopt a capital budget, fully fund the court-ordered increase in teacher salaries to satisfy the McCleary mandate, and take action on carbon pricing. There was more – it was a State of the State address, after all, and therefore came with a list of priorities – but those were some of the marquee items.

The Associated Press reports,

Gov. Jay Inslee made a forceful push Tuesday for a carbon tax in his annual state of the state address and urged lawmakers to quickly implement court-ordered increases in education funding…The Democratic governor has previously said he wants to use state reserves to help pay for education improvements ordered by the state Supreme Court. He would backfill that reserve withdrawal with about $1 billion in carbon tax revenues.

On education funding, the governor said,

Legislators can take pride that they passed a plan that will fully comply with the McCleary decision…

But the Supreme Court has made it clear that the plan needs to start one year earlier, and fortunately, we have the reserves to do that.

As we’ve written before, tapping the rainy day fund requires a supermajority vote. At this point, it’s far from clear that a supermajority of the Legislature agrees with either the governor’s sense of urgency – the plan will be fully funded, just one year later – or that accelerating the funding constitutes a proper use of the fund.

And with respect to the capital budget, the link to Hirst water rights legislation – unmentioned in the state of the state – remains challenging. As the AP reports,

Inslee told the Legislature that passage of the $4 billion budget was a crucial first order of business this session.

Lawmakers adjourned last year without passing the budget because of a dispute over how to address a court ruling related to water rights and well permits…

After the speech, Republicans expressed anger that Inslee didn’t mention the water bill in his speech and said that the two measures will continue to be linked together.

The Lens reports on Monday’s committee hearing on a Hirst bill.

The AP describes the governor’s carbon tax plan.

Under bills introduced in the House and Senate, a proposed tax of $20 per metric ton of carbon emissions would start on July 1, 2019 and increase annually by 3.5 percent over inflation.

The tax would raise about $1.5 billion over the first two years and an estimated $3.3 billion over the next four years. Half of the money from the tax — which would be paid by power plants and fuel importers but would ultimately affect consumers — would go into efforts to reduce greenhouse gas emissions, such as programs to expand opportunities for renewable energy at both homes and utilities, and research of clean energy technology. An additional 35 percent would go into flood management and storm water infrastructure, and would also be used to reduce risks of wildfires.

The AP indicates that the proposed legislation faces an uncertain future.

Democratic House Majority Leader Pat Sullivan said that while nothing is off the table, there are a diversity of opinions surrounding the tax within his caucus.

“It’s a challenge,” he said…

Republican leaders from the House and Senate criticized the costs that consumers could face under such a plan.

The Seattle Times reports on the plan in some depth, noting

But as in recent years, Inslee’s plan faces steep hurdles in Olympia.

The story provides useful perspective and history on one of the governor’s top priorities and how it’s viewed inside – and outside – legislative chambers.

My Northwest has seven takeaways from the speech.

And so begins Day 3 of the 60-day regular session.

More states turn to tolling to fund highway infrastructure and manage congestion. No sign trend will abate.

Toll roads are nothing new, but in recent years, states have increasingly turned to tolling both to raise revenues and manage congestion. As 2018 begins, Stateline reports,

With gas tax revenue stagnant and transportation funds scarce, states are turning to toll roads in 2018 to fill treasuries and manage traffic…

The full list of new tolls is hard to track, but at least a half-dozen states from Florida to Colorado are slapping tolls on roads that used to be free or building toll-only lanes this year, and many more are expected to do so next year.

As the article reports, it’s not just state governments and it does have a lot to do with gas tax revenues becoming insufficient to meet demand.

Bill Cramer of the International Bridge, Tunnel and Turnpike Association said the lack of funding from gas taxes is “100 percent” of the reason tolls are being imposed or going up. “Local governments are seeing this as a viable and useful option,” Cramer said. “It pays for the road, provides a steady stream of revenue to maintain that road at high quality and safety. And they have been very reluctant to raise the gas tax that would fund those roads.”

In our state, to take just one example, consultants recommend bumping the tolls on I-405 to increase the efficiency of express lanes. Another alternative/supplement to the gas tax is also being tested here: a pay-per-mile experiment

Stateline notes the coming tunnel tolls in Seattle (no mention of the negative toll proposed by a Seattle Times columnist).

In Seattle, talks are starting about how to charge tolls on the State Highway 99 tunnel under its downtown. The tolls are scheduled to go into effect this year, but a long ramp-up period is expected once the state transportation commission settles on the fees. Proposals include tolls that would vary during the day, from $1 overnight to a top rate of $2.50 for an afternoon trip.

Washington’s population and economy continue to grow. And with that growth, we see increased demand on our highways and streets. Our latest Opportunity Washington Scorecard reports on our Connect (transportation) measures:

Washington’s Connect ranking drops one spot to 39, after accounting for updated commute time data. Our state’s average commute time increased to 27.8 minutes in 2016, likely a byproduct of robust population and economic growth. With implementation of the 2015 Connecting Washington package, Washington is making significant investments in its statewide road and bridge networks, ferries, and public transportation systems, which will help improve system performance over time.

It’s likely that additional investment will be required to keep up with growth. And it’s likely that policymakers will continue to seek supplements to gas tax revenues.

Legislature returns with unfinished business and a 60-day deadline: Capital budget, water rights and school funding.

Today marks Day 1 of a scheduled 60-day regular session of the Legislature. Two key pieces of unfinished business from the record-long 2017 session sit at the top of the short legislative session: Fixing the Hirst water rights decision and adopting a capital budget. While voter expectations for the 2018 Legislature are low, lawmakers should be able to reach agreement on these two items.

The Seattle Times editorial board includes both on the paper’s list of priorities.

Passing a capital budget. Lawmakers in 2017 failed to approve a $4 billion capital budget to pay for building projects, which would have included about $1 billion for school construction. Without these dollars, many school districts will struggle to reduce class sizes in kindergarten through third grade, one of the requirements of the McCleary lawsuit. The lack of a capital budget has also stalled sewer replacements and other essential infrastructure projects throughout the state.

Resolving the Hirst water-rights issue. Disagreement over how to address the 2016 water-rights decision known as Hirst ended up killing the capital budget last year. Lawmakers should work toward responding to the Hirst ruling in a way that allows rural landowners to build and protects their properties’ value, while also safeguarding stream flows…

The Columbian editorial board also has Hirst and the capital budget on the short list.

Both papers 

The Associated Press reports that lawmakers are still divided on how to resolve theater-rights impasse and the two parties will have to work together to get the job done.

Republicans — who were in the majority in the Senate last year, but are the minority party this year — have insisted on a fix to the ruling, known as the Hirst ruling, before they agree to pass the two-year budget that affects projects in districts across the state, including $1 billion for K-12 school construction and money to help build facilities for the state’s mental health system. It also pays the salaries of hundreds of state workers in various departments. Even though Democrats control both the House and the Senate now, they still need Republican votes to pass a bond bill necessary to implement the budget.

Most previews of the 2018 session also mention the state Supreme Court’s call for an additional $1 billion for McCleary compliance. The court, however, found that the state had met all of the key McCleary requirements. The problem, in the court’s view, is that the state missed its deadline for full funding of salaries. With the state on track to meet the funding requirement a year later, it’s unclear whether lawmakers will make advancing the funding a priority and, if they do, where they will find the money. Here’s how the Northwest News Network reports on the issue:

Perhaps the biggest decision facing lawmakers in 2018 is how to address a state Supreme Court order that says their plan to fully fund schools by next school year is $1 billion short. Inslee wants to dip into state reserves to come up with the money.

House Majority Leader Pat Sullivan, a fellow Democrat, said he’s open to that idea…

But it doesn’t sit well with John Braun, the ranking Republican on the Senate’s budget committee…

There’s even a debate about whether to comply with the Supreme Court at all.

The Tri-City Herald editorial board is skeptical about the use of reserves.

State Treasurer Duane Davidson met with the Herald editorial board last month when he returned home for the holidays to discuss his first year on the job. Among other things, he talked about his concern over the governor’s idea to tap into the rainy day account.

Davidson was Benton County treasurer for 13 years when he won the 2016 election for the state treasurer’s job. We’ve always known him to be a solid, reliable manager of the people’s money, and we think his opinion on this issue should carry the most weight.

If he says raiding the rainy day fund is a bad idea, lawmakers should listen.

The new Senate Ways and Means leader, Sen. Christine Rolfes, says finding the $1 billion is an open question.

In an interview, Rolfes wouldn’t commit to whether lawmakers should put $1 billion more into schools, as suggested by the court. “We’re going to talk about it,” she said.

There’s going to be a lot to talk about. But not a lot of time available for talk.

Friday Roundup: Minimum wage, free college, bigger paychecks, education accountability, and Washington state’s debt level

There are always a few items we’ve read during the week that deserve more attention but don’t make it into our regular posts. So we bundle them for the Friday roundup.

Here’s this week’s bundle:

American Enterprise Institute (Perry): Exposing the minimum wage fallacy

From Henry Hazlitt’s Economics in One Lesson, we learn that “the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence: The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

…It’s an ironclad law of economics that to stimulate one group with public policies like the minimum wage, protective tariffs, or farm subsidies, another group in the economy has to be equally “un-stimulated.” In the case of the 18 increases next week in state minimum wages, the EPI’s estimate of $5 billion in additional wages will stimulate low-skilled workers next year by the exact same amount that it will “un-stimulate” merchants, businesses, business owners and their families in those 18 states – by $5 billion.

Walla Walla Union-Bulletin: Washington’s Debt Level a Cause for Concern

Our nation’s debt is immense and alarming, but it’s not the only public debt we’re carrying around. In Washington, the number is both tiny — as compared to the U.S. debt — and huge: about $21 billion, more than $2,700 for every resident.

That level of debt makes Washington the sixth highest on a list of states for per capita debt…The treasurer has urged lawmakers and the governor to keep their hands off the state’s rainy day fund, noting that we are in an economic expansion, which is the time to be saving, not borrowing.

Wall Street Journal: In cities with low unemployment, wages finally start to get bigger

In U.S. cities with the tightest labor markets, workers are finding something that’s long been missing from the broader economic expansion: faster-growing paychecks.

Workers in metro areas with the lowest unemployment are experiencing among the strongest wage growth in the country. The labor market in places like Minneapolis, Denver and Fort Myers, Fla., where unemployment rates stand near or even below 3%, has now tightened to a point where businesses are raising pay to attract employees, often from competitors.

It’s an outcome entirely expected in economic theory, but one that’s been largely absent until now in the upturn that began more than eight years ago.

Seattle Times (editorial): Keep accountability in education reform

…lawmakers must resist calls to make substantial changes to the landmark school-funding plan they passed in late June and that has yet to be fully implemented.

As required by the state Constitution, and forced by the McCleary lawsuit, Washington is now transitioning to a system in which basic education is entirely funded by the state.

The linchpin is ending the use of local levies for basic education. Relying on levies for essential school needs creates inequity, with some kids receiving lesser education than those in more affluent or supportive communities.

Accountability measures are needed to ensure that Washington doesn’t revert to an unconstitutional system providing unequal opportunity to the 1.1 million children in the state’s public schools.

Stateline: Why Free College Tuition is Spreading from Cities to States

To churn out more workers with marketable skills, an increasing number of states are offering residents free tuition to community colleges and technical schools.

The move also is a reaction to fast-rising tuition costs — increases that stem, in part, from states reducing their financial support of public colleges and universities.

Morley Winograd, president of the Campaign for Free College Tuition, a Seattle-based nonprofit, described the movement as “the fastest-growing policy idea in the country” — one with bipartisan support.

…But the free tuition push hasn’t produced an economic bonanza for any of the pioneering cities—at least not yet — and some states have struggled to come up with the money to keep their end of the bargain.